Maersk Line on Aug. 24 warned rival ocean container carriers it is prepared to fight a rate war to defend its market share.

“We won’t allow anyone to take our market share by systematically undercutting our prices … we are ready to … battle on prices,” said Nils Andersen, chief executive of Maersk’s Copenhagen-based parent A.P. Moller-Maersk.

Maersk is the world’s biggest ocean carrier with an estimated market share of around 15 percent, ahead of Geneva-based Mediterranean Shipping Co. and France’s CMA CGM.
Andersen’s warning, in an interview with Danish newspaper Dagbladet Borsen, comes just days after Maersk reported a second quarter loss of $402 million against a year-earlier profit of $198 million. First half losses climbed to $961 million.

Second quarter freight rates were down 34 percent from a year ago, but Maersk forecast modest increases in the current quarter.

Maersk is reported to have cut its rates through the second quarter to protect market share despite a rate restoration program introduced on April 1.

The carrier today unveiled a series of rate increases on its intra-Americas services from Sept. 1, claiming they were necessary “to continue providing a first class service … in an environment where the operating costs remain on the rise and current rates are below sustainable levels.”

The largest increases are on routes from North America to/from the West Coast South America — $300 for a 20-foot equivalent unit and $600 for a 40-foot equivalent unit effective Oct. 1.

There will be smaller rate rises of between $50 and $200 per TEU on routes between Mexico, Central America, the Caribbean and the east and west coasts of South America from Sept. 1 (source: www.joc.com).

]]> http://www.thinkmaritime.com/2009/08/24/maersk-%e2%80%9cready-to-battle-on-prices%e2%80%9d/feed/ 0 http://www.thinkmaritime.com/2009/08/22/maersks-global-exploration-spend-at-303-million/ http://www.thinkmaritime.com/2009/08/22/maersks-global-exploration-spend-at-303-million/#comments Sat, 22 Aug 2009 18:08:52 +0000 admin http://www.thinkmaritime.com/?p=1017 Maersk’s global exploration costs in the first half of this year reached US $303 m but all that drilling totalling 12 wells brought finds in Angola, Denmark, and the UK and the US.

Oil and gas discoveries were made in deepwater offshore Angola with the Chissonga prospect, in the UK North Sea with the Hobby and Pink wells, and in the US with the Buckskin discovery. Other wells were also drilled in Kazakhstan, Oman.

More drilling is underway too: “At the end of the first half year of 2009, exploratory drilling[s] were underway in Angola, the USA and Great Britain,” the Danish-based group said.

Total exploration costs for the first half of 2009 were US $303 m, compared with $302 m in the first half last year.

In Denmark Maersk has said development work on the Halfdan field is 50% complete with the installation of a new process platform. Production from Denmark in the first half this year was 17 m bbl, 4% down on the same period last year. “Gas production was approximately 30% lower than in the same period of 2008, mainly due to lower customer take,” the group said in its half-year income statement.

Group oil and gas production in the first half was 81 m bbl, down 8% from 2008 (source: www.offshore.247.com)

Maersk Line UK & Ireland is relocating its London head office to the city in the next few months.

The management team will move north and other employees are being offered relocation.

To encourage key staff members and their families to move to Merseyside it is understood The Mersey Partnership (TMP) will be offering support in finding the best schools and desirable areas to live.

In all, 50 or more extra posts will be moved or created at the company’s offices in The Plaza where 110 staff are already employed.

Executive team spokesman Ben Platt said numbers were unclear yet but added: “We will be recruiting in Liverpool and will build on a long established relationship with the city.”

Maersk employs more than 20,000 people worldwide and has a fleet of more than 500 container ships. It also owns Norfolkline which operates ferry services to Dublin and Belfast from Birkenhead. TMP have been in talks with the company for around three years and hailed the move to the city as a major step forward.

Lorraine Rogers, TMP chief executive, said: “This is a very significant win for Liverpool City Region. In the prevailing economic conditions operating costs are critical to every firm and as Maersk have seen there is a distinct business advantage to be gained by locating in Liverpool. We are delighted that they have chosen to make Liverpool their UK headquarters, and will continue to work with them to further facilitate their move.”

Steven Broomhead, chief executive of NWDA said: “This is excellent news for Liverpool City Region and the north west. Foreign direct investment is extremely valuable to our economy. Bringing a world famous shipping HQ to Liverpool shows just how far the city has come in recent years.”

Maersk is part of the giant AP Moller-Maersk group and is quoted on the Copenhagen stock exchange.

It currently has a customer contact centre in Old Hall Street with space to increase the numbers of staff.

Maersk Line UK & Ireland managing director, Doug Bannister said: “The welcome we have received from Liverpool and its City Region partners has been inspiring. It is an exciting opportunity for our business as well as the local community and we are looking forward to establishing our head office in Liverpool particularly given the city’s long maritime history.” (source: www.liverpooldailypost.co.uk).

• The industry will consolidate further, with the number of container lines shrinking by as much as a third.
• Freight rates will stay low until trade recovers enough to absorb vessel overcapacity. That process could take as long as four years unless many existing orders are canceled or postponed.
• Surviving carriers will have to differentiate themselves on the basis of customer service, simplicity of rates, and contracts.
• The north-south trade lanes will become more important as South America’s trade with China and India grows.
• The top terminal-operating companies will remain dominant and will acquire smaller, less geographically diversified operators.

One unanswerable question that crops up every time the container shipping industry plunges into the trough of its perennial boom-bust cycle: Will it ever learn from experience and refrain from ordering too many ships the next time it recovers, and from competing only on basis of low rates? Few expect that to happen.

“I’ve been in the industry for almost 30 years and they’ve never learned a lesson to date,” said Steven L. Horton, principal of Horton Global Strategies, an Atlanta consultant who negotiates freight rates for shippers.

Peter Shaerf, managing partner of AMA Capital Partners in New York, agrees. “Shipping lines follow each other into the water time after time, just like their mascot, the lemming,” he said.

Maersk Line’s chief executive, Eivind Kolding, told a logistics conference in Germany recently that he expects a fresh wave of mergers and acquisitions in the industry. “Quite frankly, some people won’t survive,” said Ron Widdows, chief executive of Neptune Orient Lines, parent of APL.

Widdows is also chairman of the Transpacific Stabilization Agreement, a group representing 14 lines that carry cargo from Asia to the United States.

With load factors deteriorating and freight rates at historic lows, carriers are seizing on every option they can to staunch the bleeding. They are cutting capacity by eliminating at least one of their Asia-Europe or trans-Pacific loops and combining others in vessel-sharing agreements with erstwhile competitors.

New World Alliance partners APL Ltd., MOL and Hyundai Merchant Marine are laying up 40 vessels, and APL has announced 1,000 layoffs worldwide. Mediterranean Shipping Co. and CMA CGM have suspended two services on the Asia-Europe trade because of tumbling cargo volumes and falling freight rates on one of the biggest liner routes.

Maersk, the market leader on the Asia-Europe trade with an estimated 15 percent of traffic, has already temporarily suspended two services, trimming its capacity by around 10 percent from a year ago.

The four-carrier CKYH alliance, composed of Cosco Container Lines, “K” Line, Yang Ming and Hanjin Shipping, has suspended two services, cutting Asia-Europe capacity by 30 percent, or 16,000 TEUs per week, until March. The New World Alliance and the four-carrier Grand Alliance announced they will pool services between Asia and the western Mediterranean. Cargo volume on the Asia-Europe trade fell in the third quarter from a year ago, the first decline since 2001, after growing by around 20 percent through 2007.

Some carriers, such as Zim Integrated Shipping Services and Pacific International Lines-Wan Hai, which only operate one Asia-Europe service each, are eliminating those services and buying slots on other carriers to tide them over with existing commitments. Israel Corp., the Ofer family holding company that controls 98 percent of Zim, moved to rescue it in late November with an injection of $150 million if needed, after the carrier swung to a third-quarter loss. The company also is preparing a restructuring program. Israel Corp. said Zim’s strategic plan envisaging large increases in shipping capacity and cargo volumes in 2009-12 “cannot be implemented under current market conditions.”

Other carriers may not have a guardian angel, and liner shipping executives expect some carriers to fail, which will lead to widespread consolidation in the still-fragmented industry.

The lines that fail are likely to be among the smaller carriers, most say. “I don’t believe that the big companies will go out of business,” said Anil Jay Vitarana, president of United Arab Agencies, which represents United Arab Shipping Co. in North America. “They have deep pockets. Eight of the (top) 10 are not totally liner operators.” The Japanese carriers have large Japanese trading companies behind them, and the Chinese carriers are largely government-owned or -backed.

Several of the top-tier operators have formed vessel-sharing agreements such as the ones that Maersk and CMA CGM announced in November between Asia and North America. “A year ago, we would have called them strange bedfellows,” Vitarana said. “People will find ways to survive.”

The liner shipping industry lacks the political clout that has allowed the banking and auto industries to pressure governments for bailouts. This is largely because liner carriers don’t employ large numbers of workers in the countries where they are based.

Governments may eventually face heavy lobbying pressure as some big shippers push for intervention, but that’s not likely until after one or two of the big carriers begin to totter. Their host governments may realize that carriers help grease the wheel of global commerce and understand that their loss would result in less competition, but there are no guarantees.

Some container terminals may be in trouble, too. Terminals that were snapped up by investment banks and infrastructure funds in the heady days three years ago when they looked like money trees may again become candidates for acquisition. With the slippage in U.S. container volumes this year, some of the recently acquired terminals have failed to meet covenants their buyers struck with lenders, who could force their sale to recover the loans.

Similarly, carriers that operate terminals in their major markets may also be forced to sell some of them as a means of survival. The top global terminal-operating companies whose geographical diversification enables them to survive the downturn would be logical buyers of any terminals that come on the market.

Further consolidation of liner companies appears inevitable. There will be fewer and larger carriers among the surviving lines, and they will have to compete by differentiating themselves on the ease of doing business with them. They won’t be able to differentiate themselves on individual vessel services, because many of them will be transporting cargo on the same ship through vessel-sharing agreements.

“They’ll have to compete on customer service, simplicity of rates, simplicity of contracts and by providing visibility through information technology,” Horton said. He said it will be much more important for the importer and the exporter to spend the time to know about every single carrier and their rates and services, “because the days of (rate-setting) conferences are over when everybody’s rates and surcharges were the same.”

The likeliest targets for acquisition may be the smaller lines that specialize in north-south services. “The trades with Latin America are still doing all right because most of the major carriers have pulled out,” Horton said. The north-south trades will become more important with the continuing growth of the economies of China and India, which will demand more raw materials of the kind that Latin America and Australia produce, which will, in turn, fuel further demand on the southbound leg for the kind of consumer goods that those Asian countries make.

The death in October of CSAV founder Ricardo Claro could make the Chilean carrier a target for acquisition, Horton said. CSAV has been experiencing problems raising capital, and Standard & Poor’s placed its ratings on CreditWatch Negative. Horton thinks that Hamburg Sud, which specializes in the north-south trades, might become another takeover candidate.

All of this assumes that the carriers can work their way out from under the huge amount of vessel capacity that is hanging over the main east-west trades. Carriers that have been ordering huge numbers of big, new vessels of up to 13,000 TEUs have nowhere to put them when they are delivered next year and in 2010.

“I’m sure 2009 will be awful for shippers, logistics companies and container shipping lines,” said Philip Damas, division director of Drewry Supply Chain Advisors. He thinks there’s a 50 percent chance that the ration between the supply of container capacity and the demand for cargo space could pick up halfway through 2010, because many of the ships on order may be canceled or delayed. “It all depends on how many of the existing orders are canceled. If all of the tonnage on order is delivered, you’re talking about a downturn in the container shipping sector lasting four years.”

Trevor Crowe, container analyst with Clarksons, the London ship broker and shipping services provider, is more optimistic. “Over the last 20 years, the average annual growth rate of the container trade has been close to 10 percent,” he said. “If, over the next five to 10 years, once we get through this horrible downturn in the world economy, the average growth rate in the trade gets back up to that 8 to 10 percent range, that would create a requirement for quite a lot of new capacity. This is going to create new challenges in its own right: Can we build enough ships and create enough port capacity?” (source: shippingdigest.com)

Sofar, the negotiations between SPA and the union have not been successful. The SPA proposed a solution that would cut dozens of unions jobs. SPA’s CEO Bernard Groseclose Jr. states that the problem centers on a contract between Maersk Denmark and the SPA which ends in 2010. According to the agreement the agency would purchase more than $8M in equipment and commit terminal space and staffing to Maersk.

Maersk is the No. 1 shipping line in the world and accounts for about 25% of SPA’s container business.

One proposed solution is to move to the common-use area. This solution would cut 30 clerks, 16 maintenance workers and 67 longshoremen.

ILA President Riley expects that the Maersk discussion to become a national issue that raises a broader questions: Can the shipping line legally move to the common yard?

Groseclose said Maersk worldwide market share is down and that they are talking to ports around the US to cancel or change their contracts.

Charleston Port Services owner Robert New states that the maritime community hopes for a resolution that will keep Maersk calling.

As anyone knows, Emma Maersk is the largest container vessel built ever!

Please see below Emma Maersk’s amazing ship facts:

Lenght: 397 m
Beam: 56 m
Depth: 30 m
Draft: 15.5 m
Deadweight: 156,907 mt
GT: 170,974 mt
NT: 156,907 mt
TEUs: 11,000
Speed: 25.6 kn
Ship-yard: Odense Steel
Engine: Wartsila, 80 MW
Registry Port: Taarbaek

Look at the speed … you can water ski behind this baby!

Do you have interesting stories and/or pictures of the Emma Maersk, please let us know!